Factors Affecting Credit Score Rating?

We will start our discussion with the factors that affect credit scores. Thus, the main factors which are used to calculate the FICO credit scores are the following:

1. Payment history has the maximum weightage, amounting to 35%, in determining the credit score. Thus, the information about whether an individual has paid back the money received in credit is important in ascertaining his reliability in terms of receiving credit help. Late payments (30 days, 60 days or 90 days late), bankruptcies, charge-offs, foreclosures, liens, all are captured under payment history and greatly affect the credit score.
2. The amounts owed also constitute a major portion of the factors affecting the credit score. The weightage for the amounts owed is 30%. Since amounts owed could vary a lot, this factor is necessary to understand the financial capability of a person. Credit Utilization is considered by FICO which is a measure of the amount of debt an individual holds in comparison to their available credit limits. The percentage of available credit used and the exact amount owed on different types of accounts (mortgages, credit cards, and loans) are all taken into consideration.
3. The length of credit history is also quite important and has a 15% weightage. As mentioned before, a good credit score is built over time and one doesn’t start with it. This would mean that a young person would most likely have a lower credit rating than someone much older than her. However, a younger person with a short credit history is not always at a disadvantage. If all the payments are made on time and he/she scores well in other parameters, they can have a good credit score.
4. New credit and recently opened accounts are assigned a weightage of 10% in gauging the creditworthiness of an individual. Thus, apart from the history of payments and the length and depth of credit history, the new activities taking place in terms of new credit being taken and opening accounts are also important. Whenever a person applies for a new line of credit repair services California,a hard inquiry is made under which the borrower’s credit information is checked. A soft inquiry, on the other hand, involves retrieving your credit information. The hard inquiries often end up hampering the credit score. This is because it is assumed that if many accounts have been opened recently, an individual is at a greater credit risk.
5. The types of credit in use are also assigned a weightage of 10%. The credit score calculated takes into account if an individual uses a mix of credit options such as mortgages, credit cards, loans, and store accounts (also the number of accounts one holds).

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